The economy is too weak for the Federal Reserve to raise interest rates for at least six months, says Pimco chief investment officer Bill Gross.
The central bank’s recent increase of its discount rate represents a nod toward Fed board members who are concerned about inflation rather than a wholesale change in Fed policy, he said.
"The timing was a little unusual and surprising,” Gross recently told CNBC.
“I think it was really a move to appease the three or four (inflation) hawks on the Fed," Gross said. "They've had their moment, and now we'll continue to see this type of fed funds level going forward."
He compared the situation to Groundhog Day. "We saw the shadow: We have at least six more months of zero-degree interest rates."
The Fed won’t boost its federal funds rate – now at zero to 0.25 percent – until the job market improves, Gross says. And he doesn’t expect that to happen until next year. The unemployment rate now stands at 9.7 percent.
Gross says financial markets will continue to benefit from the Fed’s zero interest rate policy.
"All the market needs is a continuation of the existing (rates) to make lots and lots of money."
Many agree with Gross that no rate hike is forthcoming. "We are not going to have any big ramp-up in rates any time soon," Adolfo Laurenti, an economist at Mesirow Financial, told the Los Angeles Times.
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